1.2 Flashcards
the market
1
Q
what is demand ?
A
the quantity of goods/ services a consumer is willing to buy at a given price and time
2
Q
what is effective demand ?
A
it is the quantity of goods and services a consumer is willing and able to buy at a given price and time
3
Q
how does price affect demand ?
A
- higher prices of goods = lower effective demand
- inverse relationship
- high prices = consumers look for market alternatives
- high prices = signal quality
4
Q
What are the 7 factors affecting demand ?
A
- consumer incomes
- prices of subsitutes and complements
- changes in fashion/ consumer preferences
- seasonality
- advertising and branding (marketing)
- demographics
- external shocks
5
Q
explain how consumer incomes affect demand ?
A
- as consumer incomes rise, normal and luxury goods are demanded
- luxury goods demand rises proportionally faster
- as the consumer incomes fall, inferior goods face higher demands
6
Q
explain how changes in prices of substitutes and complements affect demand ?
A
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